The shekel is likely to appreciate further after surging past the psychological barrier of 3.4 per dollar last week, according to Goldman Sachs Group Inc.
The move probably marks “a change in signal, not in official policy” by the Bank of Israel, Goldman analysts led by Zach Pandl said in a report to clientsDespite the U.S. currency’s weakness in recent weeks, the shekel was stable at 3.4, “suggesting that the BoI was, at least for a brief period, creating something which resembled an FX floor versus USD, in turn begging the question about how sustainable such a policy may be in a broader dollar downtrend”It’s unclear what caused the breach; end of month seasonality could have been a factorIsrael’s currency ended last week at 3.3596 against the dollar, extending its gain for the year to almost 3%Goldman analysts believe “strengthening pressures on the currency are likely to remain” given the structure of Israel’s economy; the shekel “would be be significantly stronger” without central bank interventions“The fact that the BoI has allowed for USD/ILS to break through 3.40 suggests they recognize these forces as well, and points to risks of a grind lower in USD/ILS”
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